Dubai Real Estate and the global market The Effects of external factors on the local property market are real

Dubai Real Estate and the global market
The Effects of external factors on the local property market are real
By Mohanad al-Wadiya
Special to Properties
There have been encouraging signs of recovery in the real estate industry. However, in some ways, the indicators are dependent on the relationship between the UAE dirham and foreign currencies.
Much of the growth in real estate investment has been attributed to foreign nationals, predominantly those from India, UK and Pakistan, who obviously saw the regional and global competitive advantages of buying property in Dubai.
However, in 2008, prior to the identification of the state global recession, around 11 Indian rupees were equivalent to 1 UAE dirham. For most of 2011, the exchange rate ranged between 12 and 12.5 Indian rupees to a dirham, before rising sharply in the first quarter of 2012 to arrive at the prevailing rate of approximately 15 rupees to a dirham.
Not only will the devaluation of the rupee make investing the currency in the local property market less attractive, a likely increase in the level of repatriation of dirhams earned in the emirate back to India, will also have a dampening effect.
Also, the world markets have developed mechanisms that are quick to adopt risk-averse attitudes, especially during volatile economic times. Any strengthening in the dollar versus most currencies around the world favorably affects the UAE dirham – and this is just one example of how the ‘outside’ affects the ‘inside’. It is important for the local industry to be aware of and understand the global dynamics influencing the local market. The effects of external factors on the local real estate industry are very real, and it would be prudent for all concerned to have contingency plans that will minimize any risk to market recovery and development.
The writer is the Managing Director, Harbor Real Estate
Handy Hints
– Markets have mechanisms that adopt risk- averse attitudes
– The local industry must understand global market dynamics
– Growth in real estate investment us mainly attributed to expats

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